The global semiconductor shortage is showing signs of improvement, which is good news for the auto industry.

Auto manufacturers have had to temper production over the last two years because of a shortage of microchips. But the weakening economic outlook and inflation has trimmed demand for consumer electronics that also use semiconductor chips, making more available for the auto sector.

With an improved supply, carmakers are at work whittling down order backlogs. Mercedes-Benz now has the chips it needs to work down a backlog of orders, reported Karin Radstrom, head of the Daimler Truck’s Mercedes brand. Volkswagen AG also reports steady supplies as does Paccar’s DAF Trucks unit.

But accelerating inflation and higher interest rates pose a new threat to the auto industry. Tesla CEO Elon Musk in an internal menu told staff he has a “super bad feeling” about the economy as he announced plans to cut staff by 10%.

Other automakers remain more positive about the economy. An Ifo Institute survey found German carmakers’ sentiment improved significantly in May. These automakers expressed confidence that they’ll be able to raise prices to cope with soaring raw material costs. 

BMW expressed similar optimism. All of the automaker’s plants are up and running and limited chip supplies no longer stop production. Still, BMW monitors the chip supply daily and warns of possible disruptions in the near future.

Not all companies report an ample supply of chips, either. Volvo Trucks reports limited chip availability that may impact second-quarter production. Susquehanna Financial Group reports delivery times for chips used in electronics remained flat in May, pointing to an ongoing shortage.


About the author